NEW YORK HEAVY SEAS

By Lenore FleischerBy Lenore FleischerNovember 30, 1980

THE BIG NEWS of the week is that Harcourt Brace Janovich will put into effect as of January 1, 1981, a new policy of selling its trade books on a nonreturnable basis. As you know, the publishing industry has been going through a kind of midlife crisis -- returns are up, profits down. Books are the only "products" we know that are fully returnable for credit, thanks to Dick Simon's introduction of the returns policy about 40 years ago. Authors, of course, do not recieve royalities on unsold or returned copies and many publishers keep a hefty "reserve against returns" out of the royalty checks.

Anyway, returns are at an all-time high -- some booksellers are actually paying their bills to publishers with unsold books rather than with cash -- and everybody has been talking about the weather, but HBJ is the first to do something about it. That something is: larger discounts, but no returns. You bought it, you keep it. This reduces the risks to publishers, but bodes ill for new novels, first novels or modest books, since the bookseller will be understandably chary of investing much in a untried product.

HBJ's discount schedule used to go no higher than 46 percent for 1,000 copies or more in hard cover, 50 percent in paperback; now it's a blanket 58 percent for 500 or more copies. As a business HBJ, one of the few publishers not owned by a conglomerate, is remarkably successful. Its medical, law and business books and its textbooks bring a lot of money, as do its television stations, Seaworld and other interests not related to books. But its trade department -- they make the books sold in bookstores to you and to me -- has been for some itme a leaky boat foundering in heavy seas. A rash of firings early last year started a flurry of rumors that the general trade division was about to fold.

For some time though, HBJ and the rest of the industry have been taking long hard looks at the business practices of publishing. As an example of the faults of those practices, William Janovich, chairman of the house, cites the following: "When I first edited trade books 30 years ago, the returns were 10 percent of sales. Today, for hardcover trade books and trade paperbacks the return rate is between 35 percent and 55 percent of sales. Here's an example: HBJ recently published a novel with a first printing of 50,000 copies. Reorders from bookstores and jobbers indicated we would run out of stock. We printed 7,500 copies more. Then over a period of eight months 21,000 copies were returned unsold. For this 21,000 books, stores and jobbers paid the freight coming out and going back. On these 21,000 books HBJ logged the orders, cut the invoices, and picked and packed and shipped. On these books the author recieved no royalties." NOT NATURAL ENEMIES

WHAT IS THE SIGNIFICANCE to the industry at large of HBJ's move? I spoke to a number of top publishing executives. From Roger Straus, president of Farrar, Straus and Giroux: "Although the HBJ plan is obviously too extreme, it is at least a step in the right direction, and a step that one way or another all of us are going to have to take, for the good of the retailers, the authors and the publishers alike. Other plans will obviously now evolve and I hope that by the end of '81 there will be peace and happiness between publishers and booksellers, who are not natural enemies."

From Dan Green, newly named publisher of Simon and Schuster: "There has to be a major rethinking of the decades-old policy of unlimited returns, but to go totally to a policy of no returns at all may not be the answer, and it may in fact be counterproductive. There are many alternative ways to go, and S&S is still examining the problem."

From Robert Bernstien, president of Random House: "It's certainly a time for a fresh look at what new and better ways might be possible, and we are taking that look. We hope to have found that better way early next year, hopefully by January 1. But I cannot believe that any new policy will include making books not returnable, and certainly not early in the books life. Whether backlist books should be returnable is debatable. In today's fast-media world, it's a risk for everybody to publish a book. Booksellers who buy in advance are buying a blind item; you can feel and touch other products but not an unpublished book. You might reduce the risk by alternative means, but publishing will never be entirely safe. I don't think the Harcourt system will work."

The new Harcourt policy is two-fold. Higher discounts to bookstores and new contracts for authors. The current practice in the industry is to pay an author's royalty as a percentage of the cover price of every copy sold. Now the HBJ contract will be based on "net amount recieved." I spoke to a number of literary agents about this and three out of four of them chose to remain anonymous. "It doesn't smell right to me," said one. "To tell the truth, I haven't done business with HBJ in some time, for obvious reasons." "That's one more reason not to send manuscripts to Harcourt," the second told me. The third was more bitter yet: "Harcourt has for so long been so weak as a trade publisher that I have not put any books in there for some time. Where authors and agents have done so -- and HBJ has published some splendid books -- they have published them so miserably that nomatter how the new policy hurts their authors it can't hurt them worse than the old." Wrinkles

BUT PETER SKOLNIK, senior agent of Sanford Greenburger Associates, thinks it can: "I an very concerned about the new policy, both in terms of future books and books presently under contract or already published. The very fact that the HBJ statement says that for books already under contract, "All will proceed by contract,' is what is the most troubling. The standard HBJ contract which most authors and agents have been signing for many years contains a clause which says in effect that any books sold at a discount of 50 percent or more will be subject to a significantly reduced royalty. We signed these contracts with certain understandings about HBJ's new policy. Under the old policy, HBJ rarely sold a book at a discount of 50 percent or more. Under their new policy it is possible they will rarely sell a book at less than a 50 percent discount. So by abiding by the old contracts may be devastating to authors' royalties. This problem is compounded by the fact that under the new policy booksellers can qualify for those added discounts on a mixed order of titles from a variety of HBJ divisions -- trade, juvenile and paperback -- and a bookstore order of only 50 titles entitles it to a 52 percent discount, which may cut in half the royalty of every author in that package. As for the policy affecting books signed after January: I think we can anticipate the possibilty of extraordinary problems. HBJ states that they will pay authors on an amount 'that is extant, known and stable.' On the contrary, that's exactly what it's not because on every transaction there would be a separate computaion on a different discount rate. That's a system fraught with the possibility of error and it's also a system which allows abuse. Even so, I'm very much in favor or trying a no-returns policy, assuming that the wrinkles can ironed out."

So it looks like HBJ, with its intention to "reform and revivify the writing, publishing, and selling of serious books," may be setting a precedent that others will follow, and changing the direction of the hardcover publishing business.